Demographic change is one of the least understood yet profoundly important issues facing organizations today. The “working-age population” in the U.S. — those from age 16 to 64 — is contracting at a pace not experienced since World War II. Unlike that period, there is no “baby boom” behind it, and none is expected in the near future. Generation Z has three million fewer people than the Millennial generation, and Generation Alpha, which follows Gen Z, is expected to be even smaller.

Due largely to early retirements and a caustic mix of ageism and cost-cutting measures, businesses let too many older workers go during the pandemic — and when they left, so did a lot of institutional memory, expertise, and loyalty. Those employers didn’t account for the reality that there might be too few younger workers to fill those roles as the pandemic subsided.

With fewer younger workers entering the labor market for at least a generation, employers that don’t think beyond today’s working-age population will likely struggle to build a reliable workforce that can maintain operational efficiency and effectiveness.

Demographics as destiny

In this context, it’s worth noting that the average age of the world’s population is increasing due to “population aging.” Population aging is attributed to decreased birthrates and increased longevity, which are happening at an alarming rate in nearly every corner of the world.

By the end of this decade, at least 35 countries will have more than one out of five people over the age of 65 — a first in the history of the world. However, this is already the case across Europe, as well as some of the largest economies in Asia, including Korea, Japan, and Singapore. By 2034, older adults over 65 will outnumber those under 18 in nearly all of those places, too.

In the U.S., nearly half of states and three-quarters of counties are experiencing more deaths than births, which means that if those places don’t have positive immigration rates, they’re experiencing population decline. The need for business to support and retain older workers is even more pressing in these areas.

Facing the future

In a survey by the Living, Learning, and Earning Longer Collaborative Initiative, more than eight in 10 global leaders recognized that multigenerational workforces are key to growth, yet less than half of companies include age diversity in their DEI initiatives. Pre-pandemic employment practices won’t take us into the future.

Organizations must reconsider their DEI strategies to meet the demands of a new era if they want to drive operational effectiveness, increase competitiveness, widen their appeal to consumers of all ages and abilities, and build long-term resilience. Here’s how leaders can account for the changes — and benefits — that come with an aging workforce to power productivity into the future.

Leverage inclusive design to improve retention

Businesses can support employees past the traditional retirement age by shifting strategies from recruitment to retention. Just a few years ago, this would’ve been unheard of outside of “super-aged” countries, like Germany and Japan, or in sectors like agriculture or public service.

Retaining older workers increases the diversity of organizations and can improve operational efficiency, enhance innovation, and grow the bottom line. A Gartner study revealed that a highly inclusive environment can improve team performance by up to 30%. Another by McKinsey & Company suggested that companies with the most diversity outperform those with the least by 36% in profitability.

Retention rates can be improved when inclusive design practices are levied across three dimensions: compensation and benefits strategies, working arrangements, and workplace design. The practice of inclusive design considers the full range of human diversity, including age and ability.

Compensation and benefits

The tight labor market and rising inflation are pushing workers to demand better pay and improved benefits. Caregiving leave, retirement savings programs, financial check-ups, and lifelong learning and reskilling are attractive to all employees, regardless of age. However, some companies are creating novel support for menopause, grandparents’ leave, and sabbaticals in order to reward and retain older talent.

Working arrangements

Flexible work is one way to help employees of all ages. This might include remote or hybrid work, a shortened work week, and variable schedules to meet personal or family needs or accommodate mobility challenges. Employees may also be enticed to stay with phased retirement and job-sharing programs.

These types of working arrangements, which were once the provenance of “white collar” office jobs, now have the potential to extend to industrial and service-sector jobs, too. Frontline workers, many of whom are required to be onsite, could be offered compressed schedules and more days off; “flex time,” where they work a set amount of hours and choose their starting and finishing times within agreed-on limits; or both.

Workplace design

Workplace design can impact the retention rates of workers, both positively and negatively. Effective inclusive design need not be a major capital investment (although it can be), but rather can consist of small and inexpensive interventions that flow from insights gathered from surveying and talking to employees of all ages and abilities about their user experiences within the workplace. These interventions can include everything from improved ergonomics (e.g., office chairs) to lighting (i.e., type of lighting and access to natural light). When taken together, these small changes can improve and extend workers’ well-being and productivity.

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Given the demographic shifts impacting labor and consumer markets, companies need proactive approaches to retain older workers, which will adapt team dynamics for sustainable growth well into the future. Creating that environment requires mutual respect, age-inclusive designs, and encouraging candor to catalyze the creativity grounded in the team’s diverse experiences.